Microsoft struck a deal with the world's largest personal computer maker, Hewlett-Packard Co , to place a toolbar on new PCs that leads to its Live Search engine, the companies said on Monday.

The deal is Microsoft's latest attempt to chip away at the dominance of search leader Google. The agreement, which takes effect next January for new PCs in the United States and Canada, displaces a similar one HP has with Yahoo.

Under the agreement, Microsoft's search engine will also be the default service on the Internet Explorer browser preloaded on new HP computers.

Microsoft did not disclose the terms of the agreement.

"This is the most significant distribution deal for Live Search that Microsoft has ever done," said Kevin Johnson, president of Microsoft's platform and services division.

Number-two PC maker Dell and Google have an agreement to preinstall Web and desktop search software on Dell's consumer computers. It expires in 2009.

Dell has not decided if it will continue with Google after the current deal expires, but said it was "open to alternative" partnerships.